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Behind the Numbers—Employment by Sector: Weekend Reading

In the essay below, Dr. Patricia Buckley, director for Economic Policy and Analysis, Deloitte Services LP, and Dr. Daniel Bachman, senior U.S. economist, Deloitte Services LP, discuss where jobs are being created in a post-recession economy.

As the U.S. economy continues to work its way through the aftermath of the Great Recession, the focus remains on job creation. Four-and-a half years later, overall employment is still 851,000 below its prerecession peak. However, the jobs picture is anything but monochromatic; even as some sectors remain far below their prerecession employment levels, other sectors are experiencing strong job growth. The differing employment situations are, in large part, due to the resumption of long-term trends that were in place prior to the recession. A comparison of prerecession employment levels and current employment numbers provide insight into where job creation can be expected.

As shown in Table 1, health and social services, leisure and hospitality, and business and professional services are the three sectors where employment increased the most from prerecession levels while also expanding their share of total employment. Together, these sectors have increased employment by nearly 4 million since the December 2007 start of the recession. Each of these sectors was on an upward trajectory before the recession and should continue to produce higher-than-average employment gains.

— An aging U.S. population will likely beckon faster-than-average employment growth in the health and social services sectors.

— A growing retiree population, rising tourism and changing lifestyles (fewer home-cooked meals, for example) suggest that employment growth will remain strong in the leisure and hospitality sectors.— Business and professional services employment should also enjoy faster-than-average growth as other industries continue to limit their own employment growth by contracting noncore services to outside experts.

Other notable employment gainers include private education services, which continued an upward trend that started before the recession, and mining, which is enjoying the fruits of growing energy production.

The manufacturing and construction sectors have experienced the greatest employment losses since December 2007, but their prognoses are different.

— As firms increasingly view the United States as a cost-effective place to operate, manufacturing output will continue to rebound, but it will not be a major driver of employment growth because productivity continues to improve.

— The outlook for construction is different. Although it is unlikely (and even undesirable) for employment in construction to return to its prerecession level, as the overall employment situation continues to improve, the construction sector stands to benefit from considerable pent-up demand. The U.S. population has been growing more rapidly than housing units throughout the downturn, and at some point, supply will need to catch up.

Government is another sector where employment remains substantially lower than its prerecession levels. Employment numbers at the federal, state and local levels are all lower; the local level, which accounts for 64% of government employment, has suffered 79% of the job losses.

While the wholesale trade, retail trade, transportation and warehousing sectors have not reached their December 2007 employment levels, all are on an upward trajectory. Employment in the utilities sector has been flat over the last three years, and absent a major federal infrastructure initiative, it will likely remain so. Information and financial service employment will continue to be limited by productivity improvements and consolidation.

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